Postal Realty Trust, Inc. Q1 FY2025 earnings call

• Occupancy is 99.8% with strong re-leasing momentum into 2025, including agreements for 2025, 2026, and 2027 expirations, with 3% annual escalators and 10-year leases in place.
• Multi-tiered programmatic approach with the Postal Service leads to efficient re-leasing and benefits both parties. Internal resources expand into other value-added areas like automation in acquisitions and operations.
• Acquisition activity: $16 million in Q1, $13 million in Q2 subsequent to quarter end, $22 million under definitive contracts; anticipated $80 million to $90 million for the year at or above 7.5% cap rate.
• Raised approximately $3 million of equity through an ATM offering and operating partnership units.
• Board of Directors approved a quarterly dividend of $0.2425 per share, a 1% increase from Q1 2024, well covered by AFFO.
• Active dialogue with members of Congress regarding DOGE and support for the USPS real estate network.

Occupancy is at 99.8%. For financial performance, during the first quarter, funds from operations (FFO) was $0.28 and adjusted funds from operations (AFFO) was $0.32 per diluted share. Acquisition activity: $16 million acquired in Q1, $13 million acquired subsequent to Q1 end, $22 million under definitive contracts; anticipated acquisition volume for the year is $80 million to $90 million at or above a 7.5% weighted average going-in cap rate. The portfolio has 56% of leases with annual rent escalations when all 2025 and 2026 leases are executed, and 32% of the portfolio will be 10 years in duration when all agreed-to leases through 2026 are fully executed. Revenue contribution details aren't specifically broken down by product segments as it's focused on the postal real estate business.

• AFFO guidance: On track to achieve $1.20 to $1.22 per share.
• 2025 same-store cash NOI guidance: 4% to 6%.
• Full-year 2025 cash G&A expense expected between $10.5 million and $11 million.
• Anticipated acquisition volume for the year is $80 million to $90 million at or above 7.5% weighted average going-in cap rate.

• Uncertainty in external factors that could affect the postal service and acquisition activity.
• Risks associated with forward-looking statements, as actual results may differ materially from those described.
• Dependence on the Postal Service and potential changes in their real estate needs which could impact the business.

Q: Can you give us the gap in cash leasing spreads on the '25 lease renewals and indication of leasing spreads into next year?

A: Historically haven't provided leasing spreads, but have same-store numbers for 2025.

Q: Talk a little bit more about productive conversations in Washington D.C. around DOGE and support for the USPS?

A: Constantly monitoring any news regarding DOGE and the Postal Service, speaking with members of Congress, but not much material has been said or done yet.

Q: Talk about the cap rates in the marketplace and effect of tariffs on acquisition volume?

A: Cap rates have maintained where they have been, aiming for 7.5% cap rate; not affected by tariffs, sellers motivated by liquidity, life events, or operating partnership units.

Q: Underwriting in case of government reducing real estate footprint?

A: Focus on properties critical to the Postal Service's mission, as the high retention rate speaks to the importance of the properties.

Q: Percent of acquisitions funded with OP units in 2024 and future use?

A: Average 10%-15% of deal flow with OP units, use depends on stock price and transaction.